The Myth of Profitable Athletics Departments

In the debate over the amount universities should spend on athletics, one of the common arguments of its proponents is that athletics departments are self-sustaining or even profitable. A new study by the Delta Cost Project shows that’s pretty much a myth, and that most FBS schools’ athletic departments require some subsidy from the larger institution:

Three out of four of the athletic departments of the 97 public institutions in the FBS analysis generated less money than they spent in any year between 2005 and 2010, according to the report. Athletic subsidies to offset revenue shortfalls are typically funded by student fees, and state and institutional funds.

A handful of schools at the top of Division I actually do have profitable athletics departments, the study notes, yet “about two thirds of these profitable FBS departments still received athletic subsidies in 2010.”

9 Responses to The Myth of Profitable Athletics Departments

College football and basketball are run for the benefit of affluent, vicarious alumni and as a recruitment tool for incoming students. Athletic departments don’t make money as independent organizations but in their assistance in pleasing alumni who write checks to the university and in bringing in fresh meat to shake down.

The study is bunk. Or rather, it expresses conclusions that go far beyond what the (somewhat understandably) limited scope of the analysis can support.

Let me lay out a few sources of financial benefits that universities derive from having athletic departments that are not counted in this analysis. Mind you – I don’t know the magnitude of these and thus cannot say whether they outweigh the direct losses incurred by ~75% of universities, but (and this is the key point) neither do the authors of the study.

1) Alumni are more willing to donate money to their alma maters because of the existence of big-time athletic programs (which help to bond students to their schools emotionally and provide a very convenient way for alumni who have long since graduated to re-engage with the life of the institution). As a corollary, in the aggregate student athletes are more financially successful later in life than non-athletes, and thus are themselves able to donate more.

2) State legislatures allocate more money to public universities because of the existence of big-time athletics (which enhance the prestige and emotional resonance of universities among the in-state electorate).

3) Prospective students are more willing to attend universities with big-time athletics (and thus such universities find it easier to sustain tuition levels), both because they are attracted to the athletic programs themselves and because such programs provide “glue” to the campus culture without which student life would be much less appealing. And yes – I realize that there are a handful of colleges and universities that don’t have athletics at all or that have low profile Division II/III athletics. But those institutions very rarely have more than 5,000 students and those that do are hardly, as a group, known for strong campus cultures.

4) On a related note, big-time athletics gives universities nationwide name recognition and “draw,” which in turn allows them to attract students from a much broader geographic range than they otherwise could. This enhances campus life for private institutions (admittedly a non-financial benefit) but allows public institutions to attract higher tuition paying out-of-state students.

5) Universities derive license income from trademarked logo merchandise – income that would almost certainly evaporate in the absence of big-time sports.

All-in, there are a host of financial benefits that universities derive from operating big-time athletics that are not captured in a simplistic comparison of direct revenues and costs. Again – I don’t know whether or not these benefits make up for a direct bottom line deficit. But the fact that scores of universities operate such programs, and the fact that the administrators of those institutions have access to much more information about the all-in economics of running their respective schools, suggests that these extra benefits are significant indeed.

1. The athletics department is profitable, in which case it ought to keep the money it makes.

2. It’s not profitable, in which case it ought to pay for its own debts.

In either case, there’s no reason for a minor league sports team and an educational institute to be financially linked. Baseball does fine paying for its own minor leagues. Why do football and basketball get their minor leagues subsidized by college goers and taxpayers?

CrossFit gyms are cheap to put together. That’s why they can be so profitable for people that run them. You fill a gym with a bunch of barnyard junk, and have a few macho clowns put you through a workout with exactly zero science behind it. Or better yet, make up your own dumb workout and give it an even dumber name. Make sure to use horrible form when performing dangerous movements! Then charge a large sum of money for monthly membershp. Provided you don’t actually do any of the idiotic, made up workouts popular in such gyms, you can still get a good workout with in a gym with minimal equipment.

You can get your good workout with your minimal equipment, and you don’t even have to call it CrossFit! The point was not about CrossFit, but about the possibility of relatively “grassroots” responses to bloated, decadent university habits.

In any case, CrossFit717.com. Come by and observe the horrible form, dangerous movements, and macho clowns!

I actually studied the budget at my university, Kansas State, for a paper, and found to my surprise that the biggest single portion of the operating budget came from alumni donations. State funding and tuition income aren’t as big.

K-State is in a town of less than fifty thousand people. It’s a great university, but I promise you, the football team is responsible for the exposure that keeps the alumni’s attention spans directed towards the alma mater. This doesn’t show up on budget charts; K-State football is its own separate financial entity, though, and our program might be one that does pay for itself. But even if it didn’t, athletics keeps the place alive financially. And culturally: who knows how many students would care even less about college than they already do were it not for the draw of going to the games and being a Longhorn or a Wildcat or a Fighting Irishman…

“Alumni are more willing to donate money to their alma maters because of the existence of big-time athletic programs (which help to bond students to their schools emotionally and provide a very convenient way for alumni who have long since graduated to re-engage with the life of the institution). “

Yaaas … if only dear mommo had tackled that traffic cop handing me the ticket for speeding, a few years back. I would have emotionally bonded more securely, and would have surely paid her back handsomely for her athletic prowess, if not for her selfless raising of me.

As for the alumni, they may wish to “re-engage with the life of the institution” by visiting the campus library. It’s more convenient than sitting in a drafty stadium, during the gales of November.

Of course, this all depends on whether the undergraduate rascals engaged with the books, in the first place.

It’s unfortunate SD in his comment above provides no evidence to support his points. There is always lots of talk about how athletics help drive donations. Examine the books and check for the actual proof. Here at Kent State, the largest donation to the fashion department wasn’t made because of the football team. Nor did the music department the journalism department or the school of business get their largest donations because of athletics.
I give lots of tours to students concerned about their futures. They’re not looking to take out student loans and pick out a university because of the basketball team.

Think. You have x-dollars to spend. Those who claim how athletics market the university never ask what would a marketing budget of that amount do for the university?

Which university department spends the most to recruit students? Which university department provides the most full-scholarships? Which university department pays the highest salaries? Which department gives its people free cars? Only one: the athletic dept.

If the primary purpose of a university is to be a cost-free training ground for the NFL and the NBA, then Division I universities do a great job. If instead the primary concern is education, then one must question the truly bifurcated system we have. The athletic dept gives full scholarships to students who have questionable academic potential. And at many universities, the athletic department is funded by charging fees to the academic students. Here are some numbers worthwhile to review: http://et.kent.edu/jmc40004/fees/

We live in a globally competitive economy. Do you think universities in the UK and France and Germany and China give their top scholarships to cricket & soccer players? What are the implications for our country and our economy when the highest paid public employee in state after state is either a basketball coach or a football coach?

Sports fans for many colleges have thinner skins than a latex condom. They should stop being so sensitive and start thinking about what the mission of a university is supposed to be.